Two or three years ago, there was a great buzz of excitement in the overseas property industry. Someone ‘found’ a new destination! Not only that but it was a tropical island, not much further (in flying time) than Tenerife and everything was very cheap. Better still it was a place with an astonishing good year round climate, some of the best sailing and fishing in the world and places with genuine historic charm. This was Cape Verde, a group of small islands just off the African coast and just north of the equator.
There was huge excitement, with people predicting that ‘this will be the new Canary Islands’ and much talk of a market for tens of thousands on units within the next two or three years.
By and large this hasn’t happened. There have been quite a lot of sales but not the thousands upon thousands that the developers were hoping for.
So why has this happened? Is everybody worried about global warming? Has the appetite for a good climate disappeared? Did people get too greedy?
I think that part of the reason has been that the expectations were completely false. The infrastructure in the islands would not have been sufficient to build on anything like the scale predicted and the market was full of alternative holiday and investment destinations so that building a huge customer data base in any new destination, however idyllic, was going to be a problem.
Another reason is an ongoing debate within the Cape Verde islands. What type of tourism do they want to attract? Cheap and cheerful or low volume but up market? How many homes for foreigners do they want to build? How do they control the pace of development to ensure that the market doesn’t soar like a rocket and then crash and burn two or three years later as we have seen so often in other destination? This debate is a good thing and reflects one of the features of the Cape Verde islands that struck me most strongly when I first visited a few years ago. These are serious people with a clear vision of their future and no wish to destroy their country by excessive tourism or development.
When this market first started we advised clients looking to build their investment property portfolios that we thought that this was a market with great long term potential. It had a number of immediate problems that needed to be solved before it could really take off – lack of direct flights, lack of infrastructure such as hospitals in some of the key destinations and lack of clear overall development plan – but they would be solved in the fullness of time and that the islands would then likely to develop into a slightly superior version of the Canary Islands.
One by one, those difficulties are being removed. Direct flights were introduced from the UK to the Cape Verde islands a few months ago. The politicians are now much closer to a consensus as to the way forward in terms of planning development and control and, albeit slowly, the infrastructure issues are being tackled.
So, for everybody who is not a developer looking for the quick buck nothing has gone wrong. In fact, you could argue that the opportunities today are even better than they were a couple of years ago. Then you were investing in a market where there was no real evidence that it would take off and if it did, over what time frame. Today, there is good evidence to show what has happened and equally good evidence to show the large number of projects – some very large indeed - currently in the pipe line and which will bring comfort to those who like to go into the market just after the first wave. As we keep on saying, you do not need to hit the beach on D-Day in order to get ashore. It can be a lot safer – and more comfortable – arriving three or four days later!
Our clients who bought the first properties in Cape Verde have seen them increase in value by fifty per cent, often before they have been delivered to them. This is normal for people who get into a market at a very early stage and accept the risk that it will be a market that might not take off. For the investor client, the big question is what is going to happen to property prices over the next five to ten years.
There is a very limited availability of islands with good climates and that are reasonably close to North West Europe. We think that long term, the indications for growth in property values look very good provided that you buy property that is not over priced and property that is in a good location. Interestingly, most of the people I know speak to about buying property in Cape Verde are not investors, they are people looking for a holiday home or even a place to which to retire in five or ten years time. This is unusual at this stage of the market. In most similar countries seventy or eighty per cent of people buying at this stage are buying first and foremost as an investment. The existence of such a strong end user demand at such an early stage should also encourage the investor client – after all, you make your money by selling on or renting to someone who wants to live there.
So, in summary, do we still like the market in Cape Verde? The answer is yes!
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